It's possible to achieve returns close to the market-weighted average return by buying an index fund. But if you pick the right individual stocks, you could make more -- or less -- than that. While the Talisman Mining Limited (ASX:TLM) share price is down 43% over half a decade, the total return to shareholders (which includes dividends) was 123%. That's better than the market which returned 47% over the same time. And some of the more recent buyers are probably worried, too, with the stock falling 21% in the last year. The falls have accelerated recently, with the share price down 21% in the last three months.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Talisman Mining isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over five years, Talisman Mining grew its revenue at 73% per year. That's well above most other pre-profit companies. Shareholders are no doubt disappointed with the loss of 7%, each year, in that time. You could say that the market has been harsh, given the top line growth. So now is probably an apt time to look closer at the stock, if you think it has potential.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Talisman Mining's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Talisman Mining's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Talisman Mining hasn't been paying dividends, but its TSR of 123% exceeds its share price return of -43%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
While the broader market gained around 2.2% in the last year, Talisman Mining shareholders lost 21%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 17% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 2 warning signs we've spotted with Talisman Mining .
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here